After Hurricane Katrina, the National Flood Insurance Program (NFIP), a federal program managed by the U.S. Federal Emergency Management Agency (FEMA), experienced more than $15 billion in losses in Louisiana and Mississippi.
While a homeowners insurance policy will cover a number of specific perils, a standard policy will not provide coverage for flood damage. It may provide some coverage for rain or wind, but flooding from overflowing rivers and streets will not be covered.
Flood coverage is usually purchased through an additional policy from either a private insurer or from the NFIP. The Consumer Federation of America (CFA) “believes that Hurricane Harvey could result in as many as 50,000 claims for wind damage by homeowners” and two to three times that number in flood claims according to a press release.
CFA also estimates that less than 20% of homeowners sustaining flood damage will have insurance protection, leaving many responsible for their flood-related losses.
According to FEMA, the average flood claim from 2008 to 2012 was $42,000. In 2012, the average flood insurance policy cost $650 per year. In 2014, average claims paid ranged from a low of $10,476 to a high of $42,275.
Flood loss claims averaging $24,698 in 2017
For the first five months of 2017, the average claim payment for a flood loss was $24,698. CoreLogic, a global property information and analytics firm, conducted an analysis that found 52% of commerical and residential properties in the Houston metro area are at a "high" or "moderate" risk of flooding.
For homeowners and renters impacted by Hurricane Harvey, it will be important to document the loss and file a claim with their insurer or the NFIP, if they have the appropriate coverage. Here are some things to consider:
Flood water surround homes damaged by Hurricane Harvey, Saturday, Aug. 26, 2017, in Rockport, Texas. (AP Photo/Eric Gay)
1. What does flood insurance cover?
Flood insurance covers both the building and contents inside, but it doesn’t cover the land the dwelling is located on. There may be limited coverage for basements, crawlspaces, lower floors and enclosed floors of elevated buildings.
Dwelling coverage will cover property up to $250,000 and contents coverage insures up to $100,000 of personal property. Flood insurance is not a valued policy and does not pay more than the policy limit for any losses.
Building coverage includes:
- The building and its foundation.
- The electrical and plumbing systems.
- Major systems like central air conditioning equipment, furnaces and the hot water heate.r
- Some appliances such as refrigerators, cooking stoves and built-in appliances like dishwashers.
- Permanently installed carpeting over an unfinished floor (e.g., wood, cement).
- Window blinds.
- Permanently installed paneling, wallboard, bookcases and cabinets.
- A detached garage (up to 10% of building property coverage).
Coverage for contents includes:
- Clothing, furniture and electronic equipment.
- Portable and window air conditioners.
- Portable appliances such as microwaves and dishwashers.
- Carpeting that is not covered under the building coverage
- Clothes washers and dryers.
- Food freezers and the food in them.
- Certain valuable items such as original artwork and furs (up to $2,500).
The Bayfront Seafood restaurant is surrounded by floodwaters in the aftermath of Hurricane Harvey Saturday, Aug. 26, 2017, in Palacios, Texas. (AP Photo/David J. Phillip)
2. What it doesn’t cover
There are a number of damages and expenses a flood insurance policy will not cover. These include:
- Currency, precious metals and valuable papers like stock certificates.
- Damage caused by moisture, mildew or mold that could have been prevented by the homeowner or renter.
- Property and items outside of the dwelling such as trees, plants, wells, septic systems, walkways, decks, patios, fences, hot tubs, seawalls and swimming pools.
- Financial losses due to business interruption or loss of use of the insured property.
- Most self-propelled vehicles — e.g., cars, motorcycles, four-wheelers, etc.
- Damage from sewer backups unless there is a flood in the area and the flood is the proximate cause of the sewer or drain backup.
Individuals or businesses with a flood insurance policy should file a claim as quickly as possible if they sustain flood damage. Since there has been an official Presidential Disaster Declaration, homeowners may be eligible for assistance from other sources such as FEMA, the U.S. Small Business Administration or even some state or private organizations.
Residents who register for disaster assistance may be eligible for help with temporary housing, funding for home repairs, and help with home replacement or permanent housing construction.
When contacting the insurer, make sure you have the name of the insurance company for the broker or agent, your policy number, and a phone number or email address where you can be reached regarding the claim. Once you have filed your claim, keep careful notes about who you spoke to, when and what was discussed in case any questions arise later on in the process.
Receipts from purchases, reports and other documents will help verify an insurance claim. (Photo: Shutterstock)
4. Documentation matters
A thorough record of what was lost or damaged will be one of the most important aspects of your insurance claim. Once allowed back into your home or business, take photographs of all damaged property — both personal contents and structural damage, standing floodwater, or visible flood levels on walls or furniture.
Create a list of items that were lost or damaged, including when they were purchased and the price paid. Online vendors may be able to provide receipts for items purchased in the last few months. If you have photos of items before the storm, include those with the claim too.
Also document any items that are discarded, need to be disposed of, or placed outside of the home or office. Use caution when taking photos, since parts of the structure may be loose and items may have shifted during the flooding.
Keep copies of all contractors’ estimates, any experts’ reports or other documentation related to the cost of the claim. If your claim is denied or there are questions about coverage, having a record of what was lost or the cost to repair the damage will be helpful in appealing the decision.
Take photos of large ticket replacement items that are purchased such as televisions or appliances, as well as the receipts as proof of purchase for the claim. The more documentation you have, the easier it will be to substantiate the claim.
Sadly, too many people who may not have the experience become "contractors" after a major catastrophe hits. (Photo: Shutterstock)
5. Beware of fly-by-night contractors
Before engaging any contractors, ensure that they have good references and are insured in case there are any errors or injuries while they are on your property. Reputable contractors will not request full payment up front before any work is completed.
References can be obtained from the Better Business Bureau, insurance companies and previous clients, or online from various referral services. The old adage, "If it sounds to good to be true, it probably is," definitely applies when selecting a contractor.
Filing a claim takes time and is a process. Many insurers may be able to provide some assistance for immediate living expenses when the claim is initially filed. Make sure to track all expenses related to your insurance claim — housing expenses, meals, replacement items, medications, clothing and the like. If you have questions, ask your insurance representative or check some of the resources below.
Federal Emergency Management Agency – Disaster Declaration